Friday Five: Top 5 healthcare business news items from the MCOL Weekend edition

Every business day, MCOL posts feature stories making news on the business of health care. Here are five we think are particularly important for this week:

As States Try To Rein In Drug Spending, Feds Slap Down One Bold Medicaid Move

States serve as “laboratories of democracy,” as U.S. Supreme Court Justice Louis Brandeis famously said. And states are also labs for health policy, launching all kinds of experiments lately to temper spending on pharmaceuticals.

Kaiser Health News

Friday, September 21, 2018

Despite Red Flags At Surgery Centers, Overseers Award Gold Seals

At his surgery center near San Diego, Rodney Davis wore scrubs, was referred to as “Dr. Rod” and carried the title of director of surgery. But he was a physician assistant, not a doctor, who anesthetized patients and performed liposuction with little input from his supervising doctor, court records show.

Kaiser Health News

Thursday, September 20, 2018

Time Helps Accountable Care Organizations Realize Savings in MSSP

Experience is a key factor to realizing greater cost savings in the Medicare Shared Savings Program (MSSP), a new Avalere analysis found.

RevCycle Intelligence

Thursday, September 20, 2018

Does investing in pop health and social determinants work? New study finds link to lower Medicare spending

Proponents and skeptics not convinced that investing in population-level interventions and social determinants of health, take note: New research finds that the overall well-being of a population on a county level is associated with lower healthcare spending for each Medicare fee-for-service beneficiary.

Healthcare Finance News

Wednesday, September 19, 2018

Cigna deal gets antitrust nod, positive sign for CVS/Aetna

Health insurer Cigna Corp’s (CI.N) $52 billion acquisition of pharmacy benefits manager Express Scripts Holding Co has passed U.S. antitrust scrutiny, the companies said on Monday, allowing them to proceed with a combination they say will lead to lower costs by better coordinating pharmacy and medical benefits.


Tuesday, September 18, 2018

These and more weekly news items on the business of healthcare are featured in the MCOL Weekend edition, along with the MCOL Tidbits, and more, for MCOL Premium level members.


In China, It’s the 21st Century

by Kim Bellard, September 21, 2018

It is 2018 everywhere, but not every country is treating being in the 21st century equally. China is rushing into it, even in healthcare, while the United States is tip-toeing its way towards the future. Especially in healthcare: Let’s look at a few examples:

5G: You may just be getting used to 4G, but 5G is right around the corner, with U.S. carriers expected to start offering networks in a few cities by the end of this year. Meanwhile, China has committed to having national 5G coverage by 2020, and the government is working closely with its private sector to spur development. U.S. wireless trade association CTIA believes China is leading the 5G race. Deloitte agrees; in a recent report, they cite reasons why China is leading, and warn that countries that adopt 5G first “are expected to experience disproportionate and compounding gains in macroeconomic benefits caused by “network effect.”’

Artificial Intelligence: Yes, the U.S. has been the leader in A.I., with some of the leading universities and tech companies working on it. That may not be enough. A year ago China announced that it intended to be the world leader in A.I. by 2025. China is far outspending the U.S. on A.I. research and infrastructure, coordinating efforts between government, research institutes, universities, and private companies. Dr. Steven White, a professor at China’s Tsinghua University, “likens the country’s succeed at all costs AI program to Russia’s Sputnik moment.” We have yet to have that wake-up call.

Quantum computing: Don’t worry if you don’t understand quantum computing; no one does. What matters is that quantum computing is literally a quantum leap above what current computing, so the first to deploy it will have unimaginable advantages. Take a guess what country is leading. Paul Stimers, the founder of the U.S. Quantum Industry Coalition, told CNN: “They [China] have a quantum satellite no one else has done, a communications network no one else has done, and workforce development program to bring new Chinese quantum engineers online. You start to say, that’s worrisome.”

Genetic research: The U.S. has been the leader in genetic research, but — you guessed it — that lead has been rapidly diminishing. Earlier this year, Eric Green, the head of the National Human Genome Research Institute told Asia Times: I do know that if you look in the last 15 years, the investment in genomics, in particular, have been more substantial in countries like China, South Korea, Singapore, and even places like Brazil. For example, the U.S. is still doing research on techniques like CRISPR, but The Wall Street Journal found that China is “racing ahead” in gene editing trials, in large part due to a more relaxed attitude towards regulation and possible ethical considerations.

When it comes to healthcare, China recognizes shortcomings of its existing system, and is rapidly trying to deploy 21st century solutions to it. China adopted a universal healthcare system in 2011 (about the same time the U.S. adopted ACA.)

Last year Fortune reported on China’s healthcare “boom,” spurred in part due to direct government investments and favorable regulatory processes. Similarly, earlier this year The New York Times noted U.S. tech companies’ interest in healthcare, but pointed out that their Chinese counterparts had already jumped in.

I don’t want to live in China, nor would I want to get my health care there. Yet. But if we don’t soon have our own “Sputnik moment” (or moments), we’re going to see the 21st century of healthcare happen in China, not here.


This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting


Post ACA Operating Margins: Health Systems and Health Plans

By Clive Riddle, September 14, 2018

Navigant this week released an eight-page report: Stiffening Headwinds Challenge Health Systems to Grow Smarter, that provides “an analysis of a three-year sample of the financial disclosures of 104 prominent health systems operating 47% of U.S. hospitals,” in which Navigant  “found broad-based and significant deterioration of operating earnings.”


Navigant reports that from 2015 to 2017:

  • The average operating margin decline for analyzed systems was 38.7%. Not-for-profit system margins fell 34%, while for-profit margins fell 39%.
  • 65% of systems experienced operating income declines totaling $6.8 billion, with the most significant reductions occurring in the U.S.’s fastest-growing regions: West/Southwest and South Central.
  • At the root of these declines were multiyear reductions in the rate of topline operating revenue growth, which fell from 7% (2015 to 2016) to only 5.5% (2016 to 2017), and a failure to contain expenses in line with revenue deterioration. 

Navigant cites these drivers of earnings deterioration:

  1. Weakening demand for such core hospital services as surgery and inpatient admissions, due in part to rising patient cost exposure from high-deductible health plans;
  2. Deteriorating collection rates for private accounts in non-ACA expansion states;
  3. Steady erosion in Medicare payment rates due to the ACA and the 2012 federal budget sequester; and
  4. Failure of health system value-based insurance contracts to deliver sufficient patient volume to offset steep upfront payer discounts and significant hospital population health investments.

Meanwhile on the other side of the post-ACA equation, Mark Farrah Associates this week “released an analysis brief providing insights into mid-year profitability for commercial and government lines of health insurance business. MFA compared second quarter, year-over-year profitability for the Individual, Employer-Group, Medicare and managed Medicaid segments.”

They found that:

  • At the end of second quarter 2018, the average medical expense ratio for the Individual segment was 70.8%, as compared to 77.2% the previous year.
  • Growth in premiums pushed the average medical expense ratio for the Employer-Group segment down to 80.9% for 2Q18 from 81.8% in 2Q17.
  • For Medicare Advantage, premium growth outpaced increases in medical expenses pushing the medical expense ratio down to 85.3% from 86.1% in 2Q17.
  • 2.9% increase in premiums per member per month pushed the medical expense ratio for Managed Medicaid down to 88.6% from 91.0% in 2Q17.

Mark Farrah Associates concludes the current outlook is better than the one Navigant finds for health systems: “At the mid-year point, all four health care segments are signifying improved profitability for health insurers over 2017.  The most significant change is once again in the Individual segment showing improvement over 2017, which ended up being a profitable year for the segment overall.  While this analysis of mid-year segment performance sheds light upon profitability trends for 2018, it’s a wait and see proposition until final financial results are revealed in spring of 2019.”


Friday Five: Top 5 healthcare business news items from the MCOL Weekend edition

By Claire Thayer, September 14, 2018

Every business day, MCOL posts feature stories making news on the business of health care. Here are five we think are particularly important for this week:

New Medicare Advantage Tool To Control Drug Prices Could Narrow Choices

Starting next year, Medicare Advantage plans will be able to add restrictions on expensive, injectable drugs administered by doctors to treat cancer, rheumatoid arthritis, macular degeneration and other serious diseases.


Friday, September 14, 2018

Here’s the data behind the new Apple Watch EKG app

When the new Apple Watch heart monitoring app can get a reading, it can accurately detect that a person has an irregular heart rhythm known as atrial fibrillation 99 percent of the time, according to a study of the new device that Apple submitted to the Food and Drug Administration.

Stat News

Friday, September 14, 2018

Calling teen vaping 'epidemic,' officials weigh flavor ban

U.S. health officials are sounding the alarm about teenage use of e-cigarettes, calling the problem an "epidemic" and ordering manufacturers to reverse the trend or risk having their flavored vaping products pulled from the market.

ABC News

Thursday, September 13, 2018

Hospital Operating Margins Slide 39% After ACA Expansion

The three-year stretch between 2015 to 2017 saw widespread income deterioration along with declining operating margins, according to a new study.


Wednesday, September 12, 2018

ACA about-face: Insurers keeping premium increases lower than last year, RWJF and AP studies find

The Affordable Care Act market has turned around for 2019, according to two studies, and that means premiums are not increasing as much as they did in 2018.

Healthcare Finance News

Tuesday, September 11, 2018

These and more weekly news items on the business of healthcare are featured in the MCOL Weekend edition, along with the MCOL Tidbits, and more, for MCOL Premium level members.


20 Interesting Takeaways From the CMS NORC Next Generation ACO First Annual Report

By Clive Riddle, September 7, 2018

The recently released 111-page Next Generation Accountable Care Organization (NGACO) Model Evaluation First Annual Report prepared by NORC on behalf of CMS provides a treasure trove of ACO tidbits, as CMS uses the report to tout emphasizing higher risk sharing arrangements. Here’s the NGACOs examined in the report, followed by twenty selected interesting takeaways:

  1. There were 18 active NGACOs in 2016, with 15 having prior Medicare ACO experience
  2. These 18 NGACOs served 477,197 beneficiaries, with 31,070 network providers and 775 network facilities
  3. In aggregate, NGACOs served three percent of total Medicare beneficiaries in all markets
  4. On average, a 2016 NGACO served about 26,500 aligned beneficiaries (median of 24,219 beneficiaries)
  5. NGACOs are associated with a 1.7% reduction in Medicare spending for aligned beneficiaries totaling $100.08 million (1.1% reduction after shared savings payment went to NGACOs)
  6. The estimated gross reduction in Medicare spending with $18.20 per beneficiary per month ($11.20 reduction after $7.00 in shared savings went to NGACOs)
  7. NGACOs experienced 1.7/1,000 fewer IP Hospital Days (1.3% reduction) and 20.4/1,000 more wellness visits per year (11.9% increase)
  8. Standardized risk-adjusted, per capita Medicare spending in NGACO markets ($9,638) is comparable to that of non-NGACO markets ($9,519)
  9. Considered geographically, many NGACOs have contiguous or overlapping markets and are concentrated in the Midwest (11 ACOs), with pockets in the Southeast (7 ACOs) and Northeast (4 ACOs)
  10. Nine NGACOs are in highly concentrated markets, dominated by one or a few hospital systems 
  11. NGACOs operate in markets with high Medicare Advantage and Shared Savings Program penetration rates
  12. Commercial and Medicaid ACO initiatives are more likely to be located in NGACO markets
  13. Eleven of the 18 2016 NGACOs were integrated delivery systems 
  14. On average, physicians represented more than half of each NGACO’s governing board membership
  15. Most 2016 NGACOs chose to assume 80 percent risk and the fee-for-service (FFS) payment mechanism
  16. Twenty-four percent of the 2016 NGACO participating providers’ Medicare FFS revenue from paid QEM visits was generated from care provided to NGACO-aligned beneficiaries.
  17. Seventy-one percent of aligned beneficiaries’ paid QEM visits were within their respective NGACO provider networks, compared with forty percent of the comparison group’s
  18. All but two NGACOs had preferred providers in their networks
  19. All NGACOs address end-of-life care
  20. The SNF waiver was the most commonly implemented of the three NGACO model benefit enhancements